Trustees of DC schemes are now required to:
• Design the default investment strategy in the member’s best interests
• Ensure core financial transactions are processed promptly and accurately
• Assess whether costs and charges represent “good value”
When providing the annual governance statement, some guiding principles for Trustees to consider as best practice could include:
• Make sure there is a clear and consistent process for structuring and preparing the annual governance statement. Trustees should refer to legislation and regulatory guidance and agree a checklist of contents.
• Make sure definitions and terms are clearly defined, with reference to any legislative and regulatory guidance. This means that the default investment strategy is designed in the members’ best interests. The default investment strategy should clearly articulate and disclose the standard asset class terms.
• Make sure that the evaluation process is transparent and measurable. A good value policy should be articulated, evidence should form a quantitative and qualitative assessment of how good value can be measured, and stakeholders and service providers should be included in discussions about what options are available to ensure good value.
Henry Cobbe, CFA, Managing Director, Elston Consulting said: “There is a need for increasing emphasis of DC investment governance to ensure savers’ interests are put first. Good value should be based on four key areas of governance, communication, administration and investment. All will make sure that schemes have the potential to deliver a good outcome for members within the scope of the scheme’s investment policy.”
Duncan Buchanan, President of The Society of Pension Professionals commented: “Defined contribution pension savings are, rightly, now receiving Government and Regulator attention to help ensure good outcomes for savers. The new requirement for trustees to assess and report on value for money will present challenges in the coming months. This whitepaper is welcomed because it will stimulate discussion and debate around what value should look like for investment performance.”
Please click below to see the full whitepaper which is available on The Society of Pension Professionals’ website.
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